EUR/USD has room to rise on Tuesday above critical resistance at 1.1880

EUR/USD is holding above 1.1850 as European countries slap more restrictions. Time to rally? The focus for trades is the US Consumer Price Index report for June, which could take the air out of the dollar, at least in the short term, FXStreet’s Analyst Yohay Elam briefs.

Investors focus on US inflation figures, which may have peaked

“The economic calendar is pointing to yet another month of high inflation, 4.9% on the headline and 4% in Core CPI, the latter being an increase from May's 3.8%.”

“If inflation figures indeed miss estimates, it could allow the Federal Reserve some breathing room – pushing back the timing of tapering the bank's bond-buying scheme. More dollars printed mean a weaker greenback. Fed Chair Jerome Powell is set to testify on Wednesday.”

Will any inflation-inspired dollar sell-off last? Probably not. The Delta covid variant is spreading rapidly on both sides of the Atlantic – and this is a win-win for EUR/USD bears. France, the Netherlands, and regions in Spain announced new restrictions to curb the contagion, which is mostly hurting the unvaccinated young. These measures hurt the recovery and weigh on the euro.” 

“Critical resistance awaits at 1.1880, which held the pair down in recent days and also in early July. Moreover, that is where the 100 SMA hits the price. Further above, another cap awaits at 1.1895, a swing high from last week, and then at 1.1945, and 1.1975.” 

“Support is at 1.1825, which provided support late last week, then 1.1805, a swing low from early in the week. The next cushion is the multi-month trough of 1.1781.”